PRICING SUPPLEMENT File Number: 333-122639
- ------------------ Rule 424(b)(3)
(To prospectus supplement and prospectus
dated February 25, 2005)
Pricing Supplement Number: 2513
[LOGO OMITTED]
6,851,510 Units
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series C
Accelerated Return Notes(R)
Linked to the Dow Jones EURO STOXX 50 Index
due May 8, 2007
(the "Notes")
$10 original public offering price per unit
----------------------
The Notes: Payment on the maturity date:
o The Notes are designed for investors who are o The amount you receive on the maturity date
seeking exposure to the Dow Jones EURO STOXX 50 will be based upon the direction of and
Index (index symbol "SX5E"), willing to forego percentage change in the level of the Dow Jones
interest payments on the Notes and willing to EURO STOXX 50 Index over the term of the Notes:
accept a return that will not exceed the limit
described in this pricing supplement. o If the level of the Dow Jones EURO STOXX 50
Index has increased, on the maturity date
o There will be no payments prior to the maturity you will receive a payment per unit equal to
date and we cannot redeem the Notes prior to $10 plus an amount equal to $10 multiplied
the maturity date. by triple the percentage increase of the Dow
Jones EURO STOXX 50 Index, up to a maximum
o The Notes have been approved for listing on the total payment of $11.896 per unit, as
American Stock Exchange under the trading described in this pricing supplement.
symbol "PPE". We make no representation,
however, that the Notes will remain listed for o If the level of the Dow Jones EURO STOXX 50
the entire term of the Notes. Index has decreased, on the maturity date
you will receive a payment per unit based
o The Notes will be senior unsecured debt upon that percentage decrease and, as a
securities of Merrill Lynch & Co., Inc. and result, you may receive less, and possibly
part of a series entitled "Medium-Term Notes, significantly less, than the $10 original
Series C". The Notes will have the CUSIP No.: public offering price per unit.
59021V599.
o The settlement date for the Notes is expected
to be March 6, 2006.
Information included in this pricing supplement supercedes information in
the accompanying prospectus supplement and prospectus to the extent that it is
different from that information.
INVESTING IN THE NOTES INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE PS-7 OF THIS PRICING SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT.
----------------------
Per Unit Total
-------- -----
Public offering price (1)................................................. $10.00 $68,515,100
Underwriting discount (1)................................................. $.20 $1,370,302
Proceeds, before expenses, to Merrill Lynch & Co., Inc.................... $9.80 $67,144,798
(1) The public offering price and the underwriting discount for any
single transaction to purchase between 100,000 to 299,999 units will
be $9.95 per unit and $.15 per unit, respectively, for any single
transaction to purchase between 300,000 to 499,999 units will be $9.90
per unit and $.10 per unit, respectively, and for any single
transaction to purchase 500,000 units or more will be $9.85 per unit
and $.05 per unit, respectively.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this pricing supplement or the accompanying prospectus supplement and
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------------
Merrill Lynch & Co.
----------------------
The date of this pricing supplement is March 1, 2006.
"Accelerated Return Notes(R)" is a registered mark of Merrill Lynch & Co., Inc.
"Dow Jones" is a service mark of Dow Jones & Company, Inc. and has been
licensed for use for certain purposes by Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Merrill Lynch & Co., Inc. is an authorized sublicensee. The
Notes are not sponsored, sold or promoted by Dow Jones. The "Dow Jones EURO
STOXX 50SM" is proprietary and copyrighted material. The Dow Jones EURO STOXX
50SM and the related trademarks have been licensed for certain purposes by
Merrill Lynch & Co., Inc and its subsidiaries. Neither STOXX Limited nor Dow
Jones & Company, Inc. sponsors, endorses or promotes the Notes based on the
Dow Jones EURO STOXX 50SM.
"STOXXSM" and "EURO STOXXSM" are trademarks of STOXX Limited and have been
licensed for use by Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Pricing Supplement
SUMMARY INFORMATION--Q&A..................................................PS-3
RISK FACTORS..............................................................PS-7
DESCRIPTION OF THE NOTES.................................................PS-11
THE INDEX................................................................PS-16
UNITED STATES FEDERAL INCOME TAXATION....................................PS-20
ERISA CONSIDERATIONS.....................................................PS-23
USE OF PROCEEDS AND HEDGING..............................................PS-24
SUPPLEMENTAL PLAN OF DISTRIBUTION........................................PS-24
EXPERTS..................................................................PS-24
INDEX OF CERTAIN DEFINED TERMS...........................................PS-25
Prospectus Supplement
RISK FACTORS...............................................................S-3
DESCRIPTION OF THE NOTES...................................................S-4
UNITED STATES FEDERAL INCOME TAXATION.....................................S-21
PLAN OF DISTRIBUTION......................................................S-28
VALIDITY OF THE NOTES.....................................................S-29
Prospectus
MERRILL LYNCH & CO., INC.....................................................2
USE OF PROCEEDS..............................................................2
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS.........................3
THE SECURITIES...............................................................3
DESCRIPTION OF DEBT SECURITIES...............................................4
DESCRIPTION OF DEBT WARRANTS................................................15
DESCRIPTION OF CURRENCY WARRANTS............................................17
DESCRIPTION OF INDEX WARRANTS...............................................18
DESCRIPTION OF PREFERRED STOCK..............................................24
DESCRIPTION OF DEPOSITARY SHARES............................................29
DESCRIPTION OF PREFERRED STOCK WARRANTS.....................................33
DESCRIPTION OF COMMON STOCK.................................................35
DESCRIPTION OF COMMON STOCK WARRANTS........................................38
PLAN OF DISTRIBUTION........................................................41
WHERE YOU CAN FIND MORE INFORMATION.........................................42
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................42
EXPERTS.....................................................................43
PS-2
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from this pricing supplement and the accompanying prospectus
supplement and prospectus to help you understand the Accelerated Return
Notes(R) Linked to the Dow Jones EURO STOXX 50 Index due May 8, 2007 (the
"Notes"). You should carefully read this pricing supplement and the
accompanying prospectus supplement and prospectus to fully understand the
terms of the Notes, the Dow Jones EURO STOXX 50 Index (the "Index") and the
tax and other considerations that are important to you in making a decision
about whether to invest in the Notes. You should carefully review the "Risk
Factors" section in this pricing supplement and the accompanying prospectus
supplement, which highlights certain risks associated with an investment in
the Notes, to determine whether an investment in the Notes is appropriate for
you.
References in this pricing supplement to "ML&Co.", "we", "us" and
"our" are to Merrill Lynch & Co., Inc. and references to "MLPF&S" are to
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
What are the Notes?
The Notes will be part of a series of senior debt securities issued
by ML&Co. entitled "Medium-Term Notes, Series C" and will not be secured by
collateral. The Notes will rank equally with all of our other unsecured and
unsubordinated debt. The Notes will mature on May 8, 2007. We cannot redeem
the Notes at an earlier date. We will not make any payments on the Notes until
the maturity date.
Each unit will represent a single Note with a $10 original public
offering price. You may transfer the Notes only in whole units. You will not
have the right to receive physical certificates evidencing your ownership
except under limited circumstances. Instead, we will issue the Notes in the
form of a global certificate, which will be held by The Depository Trust
Company, also known as DTC, or its nominee. Direct and indirect participants
in DTC will record your ownership of the Notes. You should refer to the
section entitled "Description of Debt Securities--Depositary" in the
accompanying prospectus.
Are there any risks associated with my investment?
Yes, an investment in the Notes is subject to risks, including the
risk of loss. Please refer to the section entitled "Risk Factors" in this
pricing supplement and the accompanying prospectus supplement.
Who publishes the Index and what does the Index measure?
The Index was created by STOXX Limited, a joint venture founded by
SWX Group, Deutsche Borse AG and Dow Jones & Company, Inc., to reflect the
market-capitalization weighted performance of large companies from the major
industry groupings in Austria, Belgium, Finland, France, Germany, Greece,
Ireland, Italy, the Netherlands, Portugal and Spain. The companies included in
the Index account for approximately 60% of the free-float market
capitalization of the Dow Jones EURO STOXX Total Market Index, which in turn
accounts for approximately 95% of the free-float market capitalization of the
countries with companies eligible for inclusion in the Index. For more
information on the Index, please see the section entitled "The Index" in this
pricing supplement.
An investment in the Notes does not entitle you to any dividends,
voting rights or any other ownership interest in the stocks included in the
Index.
How has the Index performed historically?
We have included a graph showing the year-end closing levels of the
Index for each year from 1998 to 2005 and a table and a graph showing the
historical month-end closing levels of the Index from January 2001 through
February 2006, in the section entitled "The Index--Historical Data on the
Index" in this pricing supplement. We have provided this historical
information to help you evaluate the behavior of the Index in various economic
environments; however, past performance of the Index is not necessarily
indicative of how the Index will perform in the future.
What will I receive on the maturity date of the Notes?
On the maturity date, you will receive a cash payment per unit equal
to the Redemption Amount.
PS-3
The "Redemption Amount" to which you will be entitled will depend on
the direction of and percentage change in the level of the Index over the term
of the Notes and will equal:
(i) If the Ending Value is greater than the Starting Value:
[ ]
[ [ Ending Value - Starting Value ] ]
$10 + [ $30 x [ ----------------------------- ] ];
[ [ Starting Value ] ]
[ ]
provided, however, the Redemption Amount will not exceed $11.896 per unit (the
"Capped Value").
(ii) If the Ending Value is equal to or less than the Starting Value:
[ Ending Value ]
$10 x [ -------------- ].
[ Starting Value ]
The "Starting Value" equals 3,806.03, the closing level of the Index
on March 1, 2006, the date the Notes were priced for initial sale to the
public (the "Pricing Date").
The "Ending Value" means the average of the levels of the Index at
the close of the market on five business days shortly before the maturity date
of the Notes. We may calculate the Ending Value by reference to fewer than
five or even a single day's closing level if, during the period shortly before
the maturity date of the Notes, there is a disruption in the trading of a
sufficient number of stocks included in the Index or certain futures or
options contracts relating to the Index.
The opportunity to participate in the possible increases in the
level of the Index through an investment in the Notes is limited because the
amount that you receive on the maturity date will never exceed the Capped
Value, which represents an appreciation of 18.96% over the $10 original public
offering price per unit of the Notes. However, in the event that the level of
the Index declines over the term of the Notes, the amount you receive on the
maturity date will be proportionately less than the $10 original public
offering price of the Notes. As a result, you may receive less, and possibly
significantly less, than the $10 original public offering price per unit.
For more specific information about the Redemption Amount, please
see the section entitled "Description of the Notes" in this pricing
supplement.
Will I receive interest payments on the Notes?
You will not receive any interest payments on the Notes, but you
will receive the Redemption Amount on the maturity date. We have designed the
Notes for investors who are willing to forego interest payments on the Notes,
such as fixed or floating interest rates paid on traditional interest bearing
debt securities, and willing to accept a return that will not exceed the
Capped Value, in exchange for the ability to participate in changes in the
level of the Index over the term of the Notes.
PS-4
- ------------------------------------------------------------------------------
Examples
Set forth below are three examples of Redemption Amount calculations,
including a Capped Value of $11.896:
Example 1--The hypothetical Ending Value is 80% of the Starting Value:
Starting Value: 3,806.03
Hypothetical Ending Value: 3,044.82
[ 3,044.82 ]
$10 x [ -------- ] = $8.00
[ 3,806.03 ]
Redemption Amount (per unit) = $8.00
Example 2--The hypothetical Ending Value is 105% of the Starting Value:
Starting Value: 3,806.03
Hypothetical Ending Value: 3,996.33
[ ]
[ [ 3,996.33 - 3,806.03 ] ]
$10 + [ $30 x [ ------------------- ] ] = $11.50
[ [ 3,806.03 ] ]
[ ]
Redemption Amount (per unit) = $11.50
Example 3--The hypothetical Ending Value is 120% of the Starting Value:
Starting Value: 3,806.03
Hypothetical Ending Value: 4,567.24
[ ]
[ [ 4,567.24 - 3,806.03 ] ]
$10 + [ $30 x [ ------------------- ] ] = $16.00
[ [ 3,806.03 ] ]
[ ]
(The Redemption Amount cannot be
Redemption Amount (per unit) = $11.896 greater than the Capped Value)
- ------------------------------------------------------------------------------
What about taxes?
The United States federal income tax consequences of an investment
in the Notes are complex and uncertain. By purchasing a Note, you and ML&Co.
agree, in the absence of an administrative determination, judicial ruling or
other authoritative guidance to the contrary, to characterize a Note for all
tax purposes as a pre-paid cash-settled forward contract linked to the level
of the Index. Under this characterization of the Notes, you should be required
to recognize gain or loss to the extent that you receive cash on the maturity
date or upon a sale or exchange of a Note prior to the maturity date. You
should review the discussion under the section entitled "United States Federal
Income Taxation" in this pricing supplement.
Will the Notes be listed on a stock exchange?
The Notes have been approved for listing on the American Stock
Exchange ("AMEX") under the trading symbol "PPE". We make no representation
however, that the Notes will remain listed for the entire term of the Notes.
In any event, you should be aware that the listing of the Notes on AMEX will
not necessarily ensure that a liquid trading market will be available for the
Notes. You should review the section entitled "Risk Factors--There may be an
uncertain trading market for the Notes and the market price you may receive or
be quoted for your Notes on a date prior to the stated maturity date will be
affected by this and other important factors including our costs of
developing, hedging and distributing the Notes" in this pricing supplement.
PS-5
What price can I expect to receive if I sell the Notes prior to the stated
maturity date?
In determining the economic terms of the Notes, and consequently the
potential return on the Notes to you, a number of factors are taken into
account. Among these factors are certain costs associated with creating,
hedging and offering the Notes. In structuring the economic terms of the
Notes, we seek to provide investors with what we believe to be commercially
reasonable terms and to provide MLPF&S with compensation for its services in
developing the securities.
If you sell your Notes prior to the stated maturity date, you will
receive a price determined by market conditions for the security. This price
may be influenced by many factors, such as interest rates, volatility and the
current level of the Index. In addition, the price, if any, at which you could
sell your Notes in a secondary market transaction is expected to be affected
by the factors that we considered in setting the economic terms of the Notes,
namely the underwriting discount paid in respect of the Notes, and
compensation for developing and hedging the product. Depending on the impact
of these factors, you may receive significantly less than the principal amount
of your Notes if sold before the stated maturity date.
In a situation where there had been no movement in the level of the
Index and no changes in the market conditions from those existing on the date
of this pricing supplement, the price, if any, at which you could sell your
Notes in a secondary market transaction is expected to be lower than the
original issue price. This is due to, among other things, our costs of
developing, hedging and distributing the Notes. Any potential purchasers of
your Notes in the secondary market are unlikely to consider these factors.
What is the role of MLPF&S?
Our subsidiary MLPF&S is the underwriter for the offering and sale
of the Notes. After the initial offering, MLPF&S intends to buy and sell Notes
to create a secondary market for holders of the Notes, and may stabilize or
maintain the market price of the Notes during their initial distribution.
However, MLPF&S will not be obligated to engage in any of these market
activities or continue them once it has started.
MLPF&S will also be our agent for purposes of calculating, among
other things, the Ending Value and the Redemption Amount (in such capacity,
the "Calculation Agent"). Under certain circumstances, these duties could
result in a conflict of interest between MLPF&S as our subsidiary and its
responsibilities as Calculation Agent.
What is ML&Co.?
Merrill Lynch & Co., Inc. is a holding company with various
subsidiaries and affiliated companies that provide investment, financing,
insurance and related services on a global basis.
For information about ML&Co., see the section entitled "Merrill
Lynch & Co., Inc." in the accompanying prospectus. You should also read other
documents ML&Co. has filed with the Securities and Exchange Commission, which
you can find by referring to the section entitled "Where You Can Find More
Information" in the accompanying prospectus.
PS-6
RISK FACTORS
Your investment in the Notes will involve risks. You should
carefully consider the following discussion of risks and the discussion of
risks included in the accompanying prospectus supplement before deciding
whether an investment in the Notes is suitable for you.
Your investment may result in a loss
We will not repay you a fixed amount of principal on the Notes on
the maturity date. The Redemption Amount will depend on the direction of and
percentage change in the level of the Index. Because the level of the Index is
subject to market fluctuations, the Redemption Amount you receive may be less
than the $10 original public offering price per unit of the Notes. If the
Ending Value is less than the Starting Value, the Redemption Amount will be
less than the $10 original public offering price per unit of the Notes. As a
result, you may receive less, and possibly significantly less, than the $10
original public offering price per unit.
Your yield may be lower than the yield on other debt securities of comparable
maturity
The yield that you will receive on your Notes, which could be
negative, may be less than the return you could earn on other investments.
Your yield may be less than the yield you would earn if you bought a
traditional interest bearing debt security of ML&Co. with the same stated
maturity date. Your investment may not reflect the full opportunity cost to
you when you take into account factors that affect the time value of money.
Unlike traditional interest bearing debt securities, the Notes do not
guarantee the return of a principal amount on the maturity date.
Your return is limited and will not reflect the return on a direct investment
in the stocks comprising the Index
The opportunity to participate in the possible increases in the
level of the Index through an investment in the Notes is limited because the
Redemption Amount will never exceed the Capped Value, which represents an
appreciation of 18.96% over the $10 original public offering price per unit of
the Notes. However, in the event that the level of the Index declines over the
term of the Notes, you will realize the entire decline. As a result, you may
receive less, and possibly significantly less, than the $10 original public
offering price per unit.
In addition, your return will not reflect the return you would
realize if you actually owned the stocks comprising the Index and received the
dividends paid on those stocks, if any, because the level of the Index is
calculated by reference to the prices of the stocks included in the Index
without taking into consideration the value of dividends paid on those stocks.
There may be an uncertain trading market for the Notes and the market price
you may receive or be quoted for your Notes on a date prior to the stated
maturity date will be affected by this and other important factors including
our costs of developing, hedging and distributing the Notes
The Notes have been approved for listing on AMEX under the trading
symbol "PPE". We make no representation, however, that the Notes will remain
listed for the entire term of the Notes. In any event, you should be aware
that the listing of the Notes on AMEX does not necessarily ensure that a
trading market will develop for the Notes. If a trading market does develop,
there can be no assurance that there will be liquidity in the trading market.
The development of a trading market for the Notes will depend on our financial
performance and other factors, including changes in the level of the Index.
If the trading market for the Notes is limited, there may be a
limited number of buyers for your Notes if you do not wish to hold your
investment until the stated maturity date. This may affect the price you
receive.
PS-7
If a market-maker (which may be MLPF&S) makes a market in the Notes,
the price it quotes would reflect any changes in market conditions and other
relevant factors. In addition, the price at which you could sell your Notes in
a secondary market transaction is expected to be affected by factors that we
considered in setting the economic terms of the Notes, namely the underwriting
discount paid in respect of the Notes and other costs associated with the
Notes, and compensation for developing and hedging the product. This listed
price could be higher or lower than the original issue price. MLPF&S is not
obligated to make a market in the Notes.
Assuming there is no change in the level of the Index and no change
in market conditions or any other relevant factors, the price at which a
purchaser (which may include MLPF&S) might be willing to purchase your Notes
in a secondary market transaction is expected to be lower than the original
issue price. This is due to, among other things, the fact that the original
issue price included, and secondary market prices are likely to exclude,
underwriting discount paid with respect to, and the developing and hedging
costs associated with, the Notes.
Your return may be affected by factors affecting international securities
markets
The Index is computed by reference to the value of certain companies
listed on European exchanges. The return on the Notes will be affected by
factors affecting the value of securities in European markets. European
securities markets may be more volatile than United States or certain other
securities markets and may be affected by market developments in different
ways than United States or other securities markets. Direct or indirect
government intervention to stabilize a particular securities market and
cross-shareholdings in companies in the European markets may affect prices and
the volume of trading in European markets. Also, there is generally less
publicly available information about European companies than about United
States companies that are subject to the reporting requirements of the
Securities and Exchange Commission (the "SEC"). Additionally, accounting,
auditing and financial reporting standards and requirements in Europe differ
from those applicable to United States reporting companies.
The prices and performance of securities of companies in Europe may
be affected by political, economic, financial and social factors in Europe. In
addition, recent or future changes in European government, economic and fiscal
policies, the possible imposition of, or changes in, currency exchange laws or
other laws or restrictions, and possible fluctuations in the rate of exchange
between currencies, are factors that could negatively affect the European
securities markets. Moreover, European markets may differ favorably or
unfavorably from the United States economy in economic factors such as growth
of gross national product, rate of inflation, capital reinvestment, resources
and self-sufficiency.
Many factors affect the trading value of the Notes; these factors interrelate
in complex ways and the effect of any one factor may offset or magnify the
effect of another factor
The trading value of the Notes will be affected by factors that
interrelate in complex ways. The effect of one factor may offset the increase
in the trading value of the Notes caused by another factor and the effect of
one factor may exacerbate the decrease in the trading value of the Notes
caused by another factor. For example, an increase in United States interest
rates may offset some or all of any increase in the trading value of the Notes
attributable to another factor, such as an increase in the level of the Index.
The following paragraphs describe the expected impact on the trading value of
the Notes given a change in a specific factor, assuming all other conditions
remain constant.
The level of the Index is expected to affect the trading value of
the Notes. We expect that the trading value of the Notes will depend
substantially on the amount, if any, by which the level of the Index exceeds
or does not exceed the Starting Value. However, if you choose to sell your
Notes when the level of the Index exceeds the Starting Value, you may receive
substantially less than the amount that would be payable on the maturity date
based on this value because of the expectation that the level of the Index
will continue to fluctuate until the Ending Value is determined. In addition,
because the payment on the maturity date on the Notes will not exceed the
Capped Value, we do not expect that the Notes will trade in the secondary
market above the Capped Value.
Changes in the levels of interest rates are expected to affect the
trading value of the Notes. We expect that changes in interest rates will
affect the trading value of the Notes. Generally, if United States interest
rates increase, we expect the trading value of the Notes will decrease and,
conversely, if United States interest rates decrease, we expect the trading
value of the Notes will increase. The level of interest rates in Europe may
also affect the relevant European economies and in turn the level of the
Index, and the trading value of the Notes.
PS-8
Changes in the volatility of the Index are expected to affect the
trading value of the Notes. Volatility is the term used to describe the size
and frequency of price and/or market fluctuations. If the volatility of the
Index increases or decreases, the trading value of the Notes may be adversely
affected.
Changes in dividend yields on the stocks included in the Index are
expected to affect the trading value of the Notes. In general, if dividend
yields on the stocks included in the Index increase, we expect that the
trading value of the Notes will decrease and, conversely, if dividend yields
on these stocks decrease, we expect that the trading value of the Notes will
increase.
As the time remaining to the stated maturity date of the Notes
decreases, the "time premium" associated with the Notes is expected to
decrease. We anticipate that before their stated maturity date, the Notes may
trade at a value above that which would be expected based on the level of
interest rates and the level of the Index. This difference will reflect a
"time premium" due to expectations concerning the level of the Index during
the period before the stated maturity date of the Notes. However, as the time
remaining to the stated maturity date of the Notes decreases, we expect that
this time premium will decrease, lowering the trading value of the Notes.
Changes in our credit ratings may affect the trading value of the
Notes. Our credit ratings are an assessment of our ability to pay our
obligations. Consequently, real or anticipated changes in our credit ratings
may affect the trading value of the Notes. However, because the return on your
Notes is dependent upon factors in addition to our ability to pay our
obligations under the Notes, such as the percentage increase, if any, in the
level of the Index over the term of the Notes, an improvement in our credit
ratings will not reduce the other investment risks related to the Notes.
In general, assuming all relevant factors are held constant, we
expect that the effect on the trading value of the Notes of a given change in
some of the factors listed above will be less if it occurs later in the term
of the Notes than if it occurs earlier in the term of the Notes. We expect,
however, that the effect on the trading value of the Notes of a given change
in the level of the Index will be greater if it occurs later in the term of
the Notes than if it occurs earlier in the term of the Notes.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell the stocks
included in the Index or futures or options contracts on the Index for our own
accounts for business reasons and expect to enter into these transactions in
connection with hedging our obligations under the Notes. These transactions
could affect the price of these stocks and, in turn, the level of the Index in
a manner that would be adverse to your investment in the Notes.
Potential conflicts of interest could arise
Our subsidiary MLPF&S is our agent for the purposes of calculating
the Ending Value and the Redemption Amount. Under certain circumstances,
MLPF&S as our subsidiary and its responsibilities as Calculation Agent for the
Notes could give rise to conflicts of interest. These conflicts could occur,
for instance, in connection with its determination as to whether the level of
the Index can be calculated on a particular trading day, or in connection with
judgments that it would be required to make in the event of a discontinuance
or unavailability of the Index. See the sections entitled "Description of the
Notes--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this pricing supplement. MLPF&S is required
to carry out its duties as Calculation Agent in good faith and using its
reasonable judgment. However, because we control MLPF&S, potential conflicts
of interest could arise.
We expect to enter into arrangements to hedge the market risks
associated with our obligation to pay the Redemption Amount due on the
maturity date on the Notes. We may seek competitive terms in entering into the
hedging arrangements for the Notes, but are not required to do so, and we may
enter into such hedging arrangements with one of our subsidiaries or
affiliated companies. Such hedging activity is expected to result in a profit
to those engaging in the hedging activity, which could be more or less than
initially expected, but which could also result in a loss for the hedging
counterparty.
PS-9
ML&Co. or its affiliates may presently or from time to time engage
in business with one or more of the companies included in the Index including
extending loans to, or making equity investments in, those companies or
providing advisory services to those companies, including merger and
acquisition advisory services. In the course of business, ML&Co. or its
affiliates may acquire non-public information relating to those companies and,
in addition, one or more affiliates of ML&Co. may publish research reports
about those companies. ML&Co. does not make any representation to any
purchasers of the Notes regarding any matters whatsoever relating to the
companies included in the Index. Any prospective purchaser of the Notes should
undertake an independent investigation of the companies included in the Index
as in its judgment is appropriate to make an informed decision regarding an
investment in the Notes. The composition of those companies does not reflect
any investment recommendations of ML&Co. or its affiliates.
Tax consequences are uncertain
You should consider the tax consequences of investing in the Notes,
aspects of which are uncertain. See the section entitled "United States
Federal Income Taxation" in this pricing supplement.
PS-10
DESCRIPTION OF THE NOTES
ML&Co. will issue the Notes as part of a series of senior debt
securities entitled "Medium-Term Notes, Series C" under the 1983 Indenture,
which is more fully described in the accompanying prospectus. The Notes will
mature on May 8, 2007. Information included in this pricing supplement
supercedes information in the accompanying prospectus supplement and
prospectus to the extent that it is different from that information. The CUSIP
number for the Notes is 59021V599.
While on the maturity date a holder of a Note will receive an amount
equal to the Redemption Amount, there will be no other payment of interest,
periodic or otherwise. See the section entitled "--Payment on the Maturity
Date" in this pricing supplement.
The Notes will not be subject to redemption by ML&Co. or repayment
at the option of any holder of the Notes before the maturity date.
ML&Co. will issue the Notes in denominations of whole units each
with a $10 original public offering price per unit. You may transfer the Notes
only in whole units. You will not have the right to receive physical
certificates evidencing your ownership except under limited circumstances.
Instead, we will issue the Notes in the form of a global certificate, which
will be held by The Depository Trust Company, also known as DTC, or its
nominee. Direct and indirect participants in DTC will record your ownership of
the Notes. You should refer to the section entitled "Description of Debt
Securities--Depositary" in the accompanying prospectus.
The Notes will not have the benefit of any sinking fund.
Payment on the Maturity Date
On the maturity date, you will be entitled to receive a cash payment
per unit equal to the Redemption Amount, as provided below.
Determination of the Redemption Amount
The "Redemption Amount" per unit will be determined by the
Calculation Agent and will equal:
(i) If the Ending Value is greater than the Starting Value:
[ ]
[ [ Ending Value - Starting Value ] ]
$10 + [ $30 x [ ----------------------------- ] ];
[ [ Starting Value ] ]
[ ]
provided, however, the Redemption Amount will not exceed $11.896 per unit (the
"Capped Value").
(ii) If the Ending Value is equal to or less than the Starting
Value:
[ Ending Value ]
$10 x [ -------------- ].
[ Starting Value ]
The "Starting Value" equals 3,806.03, the closing level of the Dow
Jones EURO STOXX 50 Index (the "Index") on March 1, 2006, the date the Notes
were priced for initial sale to the public (the "Pricing Date").
PS-11
The "Ending Value" will be determined by the Calculation Agent and
will equal the average of the closing levels of the Index determined on each
of the first five Calculation Days during the Calculation Period. If there are
fewer than five Calculation Days during the Calculation Period, then the
Ending Value will equal the average of the closing levels of the Index on
those Calculation Days. If there is only one Calculation Day during the
Calculation Period, then the Ending Value will equal the closing level of the
Index on that Calculation Day. If no Calculation Days occur during the
Calculation Period, then the Ending Value will equal the closing level of the
Index determined on the last scheduled Index Business Day in the Calculation
Period, regardless of the occurrence of a Market Disruption Event (as
described below under "--Adjustments to the Index; Market Disruption Events")
on that scheduled Index Business Day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day before the maturity date to and including
the second scheduled Index Business Day before the maturity date.
A "Calculation Day" means any Index Business Day during the
Calculation Period on which a Market Disruption Event has not occurred.
An "Index Business Day" means any day on which the Index or any
successor indices are calculated and published.
All determinations made by the Calculation Agent, absent a
determination of a manifest error, will be conclusive for all purposes and
binding on ML&Co. and the holders and beneficial owners of the Notes.
PS-12
Hypothetical Returns
The following table illustrates, for the Starting Value of 3,806.03
and a range of hypothetical Ending Values of the Index:
o the percentage change from the Starting Value to the hypothetical
Ending Value;
o the total amount payable on the maturity date per unit;
o the total rate of return to holders of the Notes;
o the pretax annualized rate of return to holders of the Notes; and
o the pretax annualized rate of return of an investment in the
stocks included in the Index, which includes an assumed aggregate
dividend yield of 2.71% per annum, as more fully described below.
The table includes a Capped Value of $11.896.
Pretax
Pretax annualized rate
Percentage change Total amount Total annualized of return of the
rom the Starting Value payable on the rate of rate of stocks included in
Hypothetical to the hypothetical maturity date return on return on the
Ending Value Ending Value per unit the Notes the Notes(1) Index(1)(2)
- ---------------------- ---------------------- ---------------- ------------ ------------ ------------------
1,903.02 -50.00% 5.000 -50.00% -58.31% -55.19%
2,283.62 -40.00% 6.000 -40.00% -44.86% -41.88%
2,664.22 -30.00% 7.000 -30.00% -32.51% -29.62%
3,044.82 -20.00% 8.000 -20.00% -21.01% -18.19%
3,425.43 -10.00% 9.000 -10.00% -10.21% -7.45%
3,520.58 -7.50% 9.250 -7.50% -7.61% -4.86%
3,615.73 -5.00% 9.500 -5.00% -5.04% -2.30%
3,710.88 -2.50% 9.750 -2.50% -2.50% 0.23%
3,806.03(3) 0.00% 10.000 0.00% -0.00% 2.72%
3,901.18 2.50% 10.750 7.50% 7.32% 5.18%
3,996.33 5.00% 11.500 15.00% 14.39% 7.62%
4,091.48 7.50% 11.896(4) 18.96% 18.03% 10.02%
4,186.63 10.00% 11.896 18.96% 18.03% 12.40%
4,567.24 20.00% 11.896 18.96% 18.03% 21.65%
4,947.84 30.00% 11.896 18.96% 18.03% 30.53%
- -----------------------------------------------
(1) The annualized rates of return specified in this column are calculated
on a semiannual bond equivalent basis and assume an investment term from
March 6, 2006 to May 8, 2007, a term expected to be equal to that of the
Notes.
(2) This rate of return assumes:
(a) a percentage change in the aggregate price of the stocks
included in the Index that equals the percentage change in
the Index from the Starting Value to the relevant
hypothetical Ending Value;
(b) a constant dividend yield of 2.71% per annum, paid quarterly
from the date of initial delivery of the Notes, applied to
the level of the Index at the end of each quarter assuming
this level increases or decreases linearly from the Starting
Value to the applicable hypothetical Ending Value; and
(c) no transaction fees or expenses.
(3) This is the Starting Value.
(4) The total amount payable on the maturity date per unit of the Notes
cannot exceed the Capped Value.
The above figures are for purposes of illustration only. The actual
amount received by you and the resulting total and pretax annualized rates of
return will depend on the actual Ending Value and term of your investment.
PS-13
Adjustments to the Index; Market Disruption Events
If at any time STOXX Limited ("STOXX") makes a material change in
the formula for or the method of calculating the Index or in any other way
materially modifies the Index so that the Index does not, in the opinion of
the Calculation Agent, fairly represent the level of the Index had those
changes or modifications not been made, then, from and after that time, the
Calculation Agent will, at the close of business in New York, New York, on
each date that the closing level of the Index is to be calculated, make any
adjustments as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a calculation of a level of a stock index
comparable to the Index as if those changes or modifications had not been
made, and calculate the closing level with reference to the Index, as so
adjusted. Accordingly, if the method of calculating the Index is modified so
that the level of the Index is a fraction or a multiple of what it would have
been if it had not been modified, e.g., due to a split, then the Calculation
Agent will adjust the Index in order to arrive at a level of the Index as if
it had not been modified, e.g., as if a split had not occurred.
"Market Disruption Event" means either of the following events as
determined by the Calculation Agent:
(A) the suspension of or material limitation on trading for more
than two hours of trading, or during the one-half hour period
preceding the close of trading, on the applicable exchange
(without taking into account any extended or after-hours
trading session), in 20% or more of the stocks which then
comprise the Index or any successor index; or
(B) the suspension of or material limitation on trading for more
than two hours of trading, or during the one-half hour period
preceding the close of trading, on the applicable exchange
(without taking into account any extended or after-hours
trading session), whether by reason of movements in price
otherwise exceeding levels permitted by the relevant exchange
or otherwise, in option contracts or futures contracts related
to the Index, or any successor index.
For the purpose of determining whether a Market Disruption Event has
occurred:
(1) a limitation on the hours in a trading day and/or number of
days of trading will not constitute a Market Disruption Event
if it results from an announced change in the regular business
hours of the relevant exchange;
(2) a suspension in trading in a futures or options contract on the
Index, or any successor index, by a major securities market by
reason of (a) a price change violating limits set by that
securities market, (b) an imbalance of orders relating to those
contracts or (c) a disparity in bid and ask quotes relating to
those contracts will constitute a suspension of or material
limitation on trading in futures or options contracts related
to the Index; and
(3) a suspension of or material limitation on trading on the
relevant exchange will not include any time when that exchange
is closed for trading under ordinary circumstances.
The occurrence of a Market Disruption Event could affect the
calculation of the payment you may receive on the maturity date. See the
section entitled "--Payment on the Maturity Date" in this pricing supplement.
PS-14
Discontinuance of the Index
If STOXX discontinues publication of the Index and STOXX or another
entity publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to the Index (a
"successor index"), then, upon the Calculation Agent's notification of that
determination to the trustee and ML&Co., the Calculation Agent will substitute
the successor index as calculated by STOXX or any other entity for the Index
and calculate the Ending Value as described above under "--Payment on the
Maturity Date". Upon any selection by the Calculation Agent of a successor
index, ML&Co. will cause notice to be given to holders of the Notes.
In the event that STOXX discontinues publication of the Index and:
o the Calculation Agent does not select a successor index; or
o the successor index is not published on any of the Calculation
Days,
the Calculation Agent will compute a substitute level for the Index in
accordance with the procedures last used to calculate the Index before any
discontinuance. If a successor index is selected or the Calculation Agent
calculates a level as a substitute for the Index as described below, the
successor index or level will be used as a substitute for the Index for all
purposes, including the purpose of determining whether a Market Disruption
Event exists.
If STOXX discontinues publication of the Index before the
Calculation Period and the Calculation Agent determines that no successor
index is available at that time, then on each Business Day until the earlier
to occur of:
o the determination of the Ending Value; and
o a determination by the Calculation Agent that a successor
index is available,
the Calculation Agent will determine the value that would be used in computing
the Redemption Amount as described in the preceding paragraph as if that day
were a Calculation Day. The Calculation Agent will cause notice of each value
to be published not less often than once each month in The Wall Street Journal
or another newspaper of general circulation and arrange for information with
respect to these values to be made available by telephone.
A "Business Day" is any day that is either (i) an Index Business Day
or (ii) a day on which the applicable exchanges listing the stocks of
companies used to calculate a substitute level for the Index following a
discontinuance, as discussed above, are open for trading.
Notwithstanding these alternative arrangements, discontinuance of
the publication of the Index may adversely affect trading in the Notes.
Events of Default and Acceleration
In case an Event of Default with respect to any Notes has occurred
and is continuing, the amount payable to a holder of a Note upon any
acceleration permitted by the Notes, with respect to each $10 original public
offering price per unit, will be equal to the Redemption Amount, calculated as
though the date of acceleration were the stated maturity date of the Notes.
In case of default in payment of the Notes, whether on the stated
maturity date or upon acceleration, from and after that date the Notes will
bear interest, payable upon demand of their holders, at the rate of 2.25% per
annum, to the extent that payment of interest is legally enforceable on the
unpaid amount due and payable on that date in accordance with the terms of the
Notes to the date payment of that amount has been made or duly provided for.
PS-15
THE INDEX
The Index was created by STOXX, a joint venture founded by SWX
Group, Deutsche Borse AG and Dow Jones & Company, Inc. ("Dow Jones").
Publication of the Index began on February 26, 1998, based on an initial level
of the Index of 1,000 at December 31, 1991.
The Index was created by STOXX Limited to reflect the
market-capitalization weighted performance of large companies from the major
industry groupings in Austria, Belgium, Finland, France, Germany, Greece,
Ireland, Italy, the Netherlands, Portugal and Spain. The companies included in
the Index account for approximately 60% of the free-float market
capitalization of the Dow Jones EURO STOXX Total Market Index, which in turn
accounts for approximately 95% of the free-float market capitalization of the
countries with companies eligible for inclusion in the Index.
The Index is currently calculated by: (i) multiplying the per share
price of each underlying security by the number of free-float adjusted
outstanding shares (and, if the stock is not quoted in euros, then multiplying
by the related country currency and an exchange factor which reflects the
exchange rate between the related country currency and the euro); (ii)
calculating the sum of all these products (the "Index Aggregate Market
Capitalization"); and (iii) dividing the Index Aggregate Market Capitalization
by a divisor which represents the Index Aggregate Market Capitalization on the
base date of the Index and which can be adjusted to allow changes in the
issued share capital of individual underlying securities, including the
deletion and addition of stocks, the substitution of stocks, stock dividends
and stock splits, to be made without distorting the Index. Because of this
capitalization weighting, movements in share prices of the underlying
securities of companies with relatively greater market capitalization will
have a greater effect on the level of the entire Index than will movements in
share prices of the underlying securities of companies with relatively smaller
market capitalization.
The composition of the Index is reviewed annually, and changes are
implemented on the third Friday in September, using market data from the end
of August as the basis for the review process. Changes in the composition of
the Index are made to ensure that the Index includes those companies which,
within the eligible countries and within each industry sector, have the
greatest market capitalization. Changes in the composition of the Index are
made entirely by STOXX without consultation with the companies represented in
the Index or ML&Co. The Index is also reviewed on an ongoing basis, and a
change in the composition of the Index may be necessary if there have been
extraordinary events for one of the issuers of the underlying securities,
e.g., delisting, bankruptcy, merger or takeover. In these cases, the event is
taken into account as soon as it is effective. The underlying securities may
be changed at any time for any reason. Neither STOXX nor any of its founders
is affiliated with ML&Co. nor have they participated in any way in the
creation of the Notes.
ML&Co. or its affiliates may presently or from time to time engage
in business with the publishers, owners, founders or creators of the Index or
any of its successors or one or more of the issuers of the underlying
securities, including extending loans to, making equity investments in or
providing advisory services, including merger and acquisition advisory
services, to the publishers, their successors, founders or creators or to any
of the issuers. In the course of business with the issuers, ML&Co. or its
affiliates may acquire non-public information with respect to the issuers.
ML&Co. may also act as market maker for the common stocks of the issuers.
ML&Co. does not make any representation to any purchaser of the Notes with
respect to any matters whatsoever relating to any of the publishers, their
successors, founders or creators or to any of the issuers. Any prospective
purchaser of the Notes should undertake an independent investigation of the
issuers of the underlying securities and with respect to the competency of its
publisher to formulate and calculate the Index as in its judgment is
appropriate to make an informed decision with respect to an investment in the
Notes. The composition of the Index does not reflect any investment or sell
recommendations of ML&Co. or its affiliates.
A representative of an affiliate of ML&Co. may from time to time be
a member of the STOXX Limited Advisory Committee. STOXX states in its Guide to
the Dow Jones STOXX Indexes that STOXX's Advisory Committee advises the
Supervisory Board on matters relating to the Index. This advisory committee
proposes changes in the composition of the Index to the Supervisory Board and
makes recommendations with respect to the accuracy and transparency of the
Index computation. Decisions on the composition and changes in the Index are
reserved to the Supervisory Board.
PS-16
Historical data on the Index
The following graph sets forth the closing levels of the Index on
the last business day of each year from 1998 through 2005, as published by
STOXX. The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given that the level
of the Index will not decline and thereby reduce the Redemption Amount which
may be payable to you at maturity.
[GRAPHIC OMITTED -- Graph shows closing levels of
3,342.32 for December 31, 1998,
4,904.46 for December 31, 1999,
4,772.39 for December 29, 2000,
3,806.13 for December 31, 2001,
2,386.41 for December 31, 2002,
2,760.66 for December 31, 2003,
2,951.24 for December 31, 2004,
3,578.93 for December 30, 2005.]
The following table sets forth the level of the Index at the end of
each month in the period from January 2001 through February 2006. This
historical data on the Index is not necessarily indicative of the future
performance of the Index or what the value of the Notes may be. Any historical
upward or downward trend in the level of the Index during any period set forth
below is not an indication that the Index is more or less likely to increase
or decrease at any time during the term of the Notes.
2001 2002 2003 2004 2005 2006
-------- -------- -------- --------- -------- -----------
January....................... 4,779.90 3,670.26 2,248.17 2,839.13 2,984.59 3,691.41
February...................... 4,318.88 3,624.74 2,140.73 2,893.18 3,058.32 3,774.51
March......................... 4,185.00 3,784.05 2,036.86 2,787.49 3,055.73
April......................... 4,525.01 3,574.23 2,324.23 2,787.48 2,930.10
May........................... 4,426.24 3,425.79 2,330.06 2,736.83 3,076.70
June.......................... 4,243.91 3,133.39 2,419.51 2,811.08 3,181.54
July.......................... 4,091.38 2,685.79 2,519.79 2,720.05 3,326.51
August........................ 3,743.97 2,709.29 2,556.71 2,670.79 3,263.78
September..................... 3,296.66 2,204.39 2,395.87 2,726.30 3,428.51
October....................... 3,478.63 2,518.99 2,575.04 2,811.72 3,320.15
November...................... 3,658.27 2,656.85 2,630.47 2,876.39 3,447.07
December...................... 3,806.13 2,386.41 2,760.66 2,951.24 3,578.93
PS-17
The following graph sets forth the historical performance of the
Index presented in the preceding table. Past movements of the Index are not
necessarily indicative of the future performance of the Index. On March 1,
2006, the closing level of the Index was 3,806.03.
[GRAPHIC OMITTED]
License Agreement
STOXX and Merrill Lynch & Co., Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch &
Co. and its wholly-owned subsidiaries, in exchange for a fee, of the right to
use the EURO STOXX 50 Index, which is owned and published by STOXX, in
connection with certain securities and other products, including the Notes.
The license agreement between STOXX and Merrill Lynch & Co., Inc.
provides that the following language must be set forth in this pricing
supplement:
The Dow Jones EURO STOXX 50 Index is proprietary and copyrighted
material. The Dow Jones EURO STOXX 50 Index and the related trademarks have
been licensed for certain purposes by Merrill Lynch & Co., Inc. STOXX, Dow
Jones and Dow Jones EURO STOXX 50 Index are trademarks of Dow Jones & Company,
Inc. and have been licensed for use. STOXX and Dow Jones have no relationship
to Merrill Lynch & Co., Inc., other than the licensing of the Dow Jones EURO
STOXX 50 Index and the related trademarks for use in connection with the
Notes. STOXX and Dow Jones do not:
o Sponsor, endorse, sell or promote the Notes.
o Recommend that any person invest in the Notes or any other
securities.
o Have any responsibility or liability for or make any
decisions about the timing, amount or pricing of the Notes.
o Have any responsibility or liability for the administration,
management or marketing of the Notes.
o Consider the needs of the owners of the Notes in determining,
composing or calculating the Dow Jones EURO STOXX 50 Index or
have any obligation to do so.
PS-18
- ------------------------------------------------------------------------------
STOXX and Dow Jones will not have any liability in connection with the Notes.
Specifically,
o STOXX and Dow Jones do not make any warranty, express or implied and
disclaim any and all warranty about:
o The results to be obtained by the Notes, the owner of the Notes or any
other person in connection with the use of the Dow Jones EURO STOXX 50
Index and the data included in the Dow Jones EURO STOXX 50 Index;
o The accuracy or completeness of the Dow Jones EURO STOXX 50 Index and
its data;
o The merchantability and the fitness for a particular purpose or use of
the Dow Jones EURO STOXX 50 Index and its data;
o STOXX and Dow Jones will have not liability for any errors, omissions
or interruptions in the Dow Jones EURO STOXX 50 Index or its data;
o Under no circumstances will STOXX or Dow Jones be liable for any lost
profits or indirect, punitive, special or consequential damages or
losses, even if STOXX or Dow Jones knows that they might occur.
The licensing agreement between the Merrill Lynch and Co., Inc. and
STOXX is solely for their benefit and not for the benefit of the owners of the
Notes or any other third parties.
- ------------------------------------------------------------------------------
All disclosures contained in this pricing supplement regarding the
EURO STOXX 50 Index, including its make-up, method of calculation and changes
in its components, are derived from publicly available information prepared by
STOXX and Dow Jones.
ML&Co. and MLPF&S do not assume any responsibility for the accuracy
or completeness of that information.
PS-19
UNITED STATES FEDERAL INCOME TAXATION
Set forth in full below is the opinion of Sidley Austin LLP, counsel
to ML&Co. ("Tax Counsel"). As the law applicable to the U.S. federal income
taxation of instruments such as the Notes is technical and complex, the
discussion below necessarily represents only a general summary. The following
discussion is based upon laws, regulations, rulings and decisions now in
effect, all of which are subject to change (including changes in effective
dates) or possible differing interpretations. The discussion below supplements
the discussion set forth under the section entitled "United States Federal
Income Taxation" that is contained in the accompanying prospectus supplement
and supercedes that discussion to the extent that it contains information that
is inconsistent with that contained in the accompanying prospectus supplement.
The discussion below deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, real estate
investment trusts, tax-exempt entities or persons holding Notes in a
tax-deferred or tax-advantaged account (except to the extent specifically
discussed below), dealers in securities or currencies, traders in securities
that elect to mark to market, persons subject to the alternative minimum tax,
persons holding Notes as a hedge against currency risks, as a position in a
"straddle" or as part of a "hedging", "conversion" or "integrated" transaction
for tax purposes, or persons whose functional currency is not the United
States dollar. It also does not deal with holders other than original
purchasers. If a partnership holds the Notes, the tax treatment of a partner
in the partnership will generally depend upon the status of the partner and
the activities of the partnership. Thus, persons who are partners in a
partnership holding the Notes should consult their own tax advisors. Moreover,
all persons considering the purchase of the Notes should consult their own tax
advisors concerning the application of United States federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation or a partnership (including
an entity treated as a corporation or a partnership for United States federal
income tax purposes) that is created or organized in or under the laws of the
United States, any state thereof or the District of Columbia (unless, in the
case of a partnership, Treasury regulations are adopted that provide
otherwise), (iii) an estate the income of which is subject to United States
federal income tax regardless of its source, (iv) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust or (v) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. Certain trusts not described
in clause (iv) above in existence on August 20, 1996, that elect to be treated
as United States persons will also be U.S. Holders for purposes of the
following discussion. As used herein, the term "non-U.S. Holder" means a
beneficial owner of a Note that is not a U.S. Holder.
General
There are no statutory provisions, regulations, published rulings or
judicial decisions addressing or involving the characterization and treatment,
for United States federal income tax purposes, of the Notes or securities with
terms substantially the same as the Notes. Accordingly, the proper United
States federal income tax characterization and treatment of the Notes is
uncertain. Pursuant to the terms of the Notes, ML&Co. and every holder of a
Note agree (in the absence of an administrative determination, judicial ruling
or other authoritative guidance to the contrary) to characterize a Note for
all tax purposes as a pre-paid cash-settled forward contract linked to the
level of the Index. In the opinion of Tax Counsel, this characterization and
tax treatment of the Notes, although not the only reasonable characterization
and tax treatment, is based on reasonable interpretations of law currently in
effect and, even if successfully challenged by the Internal Revenue Service
(the "IRS"), will not result in the imposition of penalties. The treatment of
the Notes described above is not, however, binding on the IRS or the courts.
No statutory, judicial or administrative authority directly addresses the
characterization of the Notes or instruments similar to the Notes for United
States federal income tax purposes, and no ruling is being requested from the
IRS with respect to the Notes.
Due to the absence of authorities that directly address instruments
that are similar to the Notes, significant aspects of the United States
federal income tax consequences of an investment in the Notes are not certain,
and no assurance can be given that the IRS or the courts will agree with the
characterization described above. Accordingly, prospective purchasers are
urged to consult their own tax advisors regarding the United States federal
income tax
PS-20
consequences of an investment in the Notes (including alternative
characterizations of the Notes) and with respect to any tax consequences
arising under the laws of any state, local or foreign taxing jurisdiction.
Unless otherwise stated, the following discussion is based on the assumption
that the treatment described above is accepted for United States federal
income tax purposes.
Tax Treatment of the Notes
Assuming the characterization of the Notes as set forth above, Tax
Counsel believes that the following United States federal income tax
consequences should result.
Tax Basis. A U.S. Holder's tax basis in a Note will equal the amount
paid by the U.S. Holder to acquire the Note.
Payment on the Maturity Date. Upon the receipt of cash on the
maturity date of the Notes, a U.S. Holder will recognize gain or loss. The
amount of that gain or loss will be the extent to which the amount of the cash
received differs from the U.S. Holder's tax basis in the Note. It is uncertain
whether any such gain or loss would be treated as ordinary income or loss or
capital gain or loss. Absent a future clarification in current law (by an
administrative determination, judicial ruling or otherwise), where required,
ML&Co. intends to report any such gain or loss to the IRS in a manner
consistent with the treatment of that gain or loss as capital gain or loss. If
any gain or loss is treated as capital gain or loss, then that gain or loss
will generally be short-term or long-term capital gain or loss, as the case
may be, depending upon the U.S. Holder's holding period for the Note as of the
maturity date. The deductibility of capital losses is subject to certain
limitations.
Sale or Exchange of the Notes. Upon a sale or exchange of a Note
prior to the maturity date of the Notes, a U.S. Holder will generally
recognize capital gain or loss in an amount equal to the difference between
the amount realized on the sale or exchange and the U.S. Holder's tax basis in
the Note so sold or exchanged. Any such capital gain or loss will generally be
short-term or long-term capital gain or loss, depending upon the U.S. Holder's
holding period for the Note at the time of disposition. As discussed above,
the deductibility of capital losses is subject to certain limitations.
Possible Alternative Tax Treatments of an Investment in the Notes
Due to the absence of authorities that directly address the proper
characterization of the Notes, no assurance can be given that the IRS will
accept, or that a court will uphold, the characterization and tax treatment of
the Notes described above. In particular, the IRS could seek to analyze the
United States federal income tax consequences of owning the Notes under
Treasury regulations governing contingent payment debt instruments (the "CPDI
Regulations").
If the IRS were successful in asserting that the CPDI Regulations
applied to the Notes, the timing and character of income thereon would be
significantly affected. Among other things, a U.S. Holder would be required to
accrue original issue discount on the Notes every year at a "comparable yield"
for us, determined at the time of issuance of the Notes. Furthermore, any gain
realized on the maturity date or upon a sale or other disposition of the Notes
would generally be treated as ordinary income, and any loss realized on the
maturity date or upon a sale or other disposition of the Notes would be
treated as ordinary loss to the extent of the U.S. Holder's prior accruals of
original issue discount and capital loss thereafter.
Even if the CPDI Regulations do not apply to the Notes, other
alternative United States federal income tax characterizations or treatments
of the Notes may also be possible, and if applied could also affect the timing
and the character of the income or loss with respect to the Notes.
Accordingly, prospective purchasers are urged to consult their tax advisors
regarding the United States federal income tax consequences of an investment
in the Notes.
Constructive Ownership Law
Section 1260 of the Internal Revenue Code of 1986, as amended (the
"Code"), treats a taxpayer owning certain types of derivative positions in
property as having "constructive ownership" of that property, with the result
that all or a portion of any long-term capital gain recognized by that
taxpayer with respect to the derivative position will be recharacterized as
ordinary income. In its current form, Section 1260 of the Code does not apply
to the Notes. If Section 1260 of the Code were to apply to the Notes in the
future, however, the effect on a U.S. Holder of a
PS-21
Note would be to treat all or a portion of any long-term capital gain
recognized by the U.S. Holder on the sale, exchange or maturity of a Note as
ordinary income. In addition, Section 1260 of the Code would impose an
interest charge on any gain that was recharacterized. U.S. Holders should
consult their tax advisors regarding the potential application of Section 1260
of the Code, if any, to the purchase, ownership and disposition of a Note.
Unrelated Business Taxable Income
Section 511 of the Code generally imposes a tax, at regular
corporate or trust income tax rates, on the "unrelated business taxable
income" of certain tax-exempt organizations, including qualified pension and
profit sharing plan trusts and individual retirement accounts. As discussed
above, the U.S. federal income tax characterization of the Notes is uncertain.
Nevertheless, in general, if the Notes are held for investment purposes, the
amount of income or gain, if any, realized on the maturity date or upon a sale
or exchange of a Note prior to the maturity date, or any income that would
accrue to a holder of a Note if the Notes were characterized as contingent
payment debt instruments (as discussed above), will not constitute unrelated
business taxable income. However, if a Note constitutes debt-financed property
(as defined in Section 514(b) of the Code) by reason of indebtedness incurred
by a holder of a Note to purchase the Note, all or a portion of any income or
gain realized with respect to such Note may be classified as unrelated
business taxable income pursuant to Section 514 of the Code. Moreover,
prospective investors in the Notes should be aware that whether or not any
income or gain realized with respect to a Note which is owned by an
organization that is generally exempt from U.S. federal income taxation
pursuant to Section 501(a) of the Code constitutes unrelated business taxable
income will depend upon the specific facts and circumstances applicable to
such organization. Accordingly, any potential investors in the Notes that are
generally exempt from U.S. federal income taxation pursuant to Section 501(a)
of the Code are urged to consult with their own tax advisors concerning the
U.S. federal income tax consequences to them of investing in the Notes.
Non-U.S. Holders
Based on the treatment of each Note as a pre-paid cash-settled
forward contract linked to the level of the Index, in the case of a non-U.S.
Holder, a payment made with respect to a Note on the maturity date will not be
subject to United States withholding tax, provided that the non-U.S. Holder
complies with applicable certification requirements and that the payment is
not effectively connected with a United States trade or business of the
non-U.S. Holder. Any capital gain realized upon the sale or other disposition
of a Note by a non-U.S. Holder will generally not be subject to United States
federal income tax if (i) that gain is not effectively connected with a United
States trade or business of the non-U.S. Holder and (ii) in the case of an
individual non-U.S. Holder, the individual is not present in the United States
for 183 days or more in the taxable year of the sale or other disposition, or
the gain is not attributable to a fixed place of business maintained by the
individual in the United States, and the individual does not have a "tax home"
(as defined for United States federal income tax purposes) in the United
States.
As discussed above, alternative characterizations of the Notes for
United States federal income tax purposes are possible. Should an alternative
characterization of the Notes, by reason of a change or clarification of the
law, by regulation or otherwise, cause payments with respect to the Notes to
become subject to withholding tax, ML&Co. will withhold tax at the applicable
statutory rate. Prospective non-U.S. Holders of the Notes should consult their
own tax advisors in this regard.
Backup Withholding
A beneficial owner of a Note may be subject to backup withholding at
the applicable statutory rate of United States federal income tax on certain
amounts paid to the beneficial owner unless the beneficial owner provides
proof of an applicable exemption or a correct taxpayer identification number,
and otherwise complies with applicable requirements of the backup withholding
rules.
Any amounts withheld under the backup withholding rules from a
payment to a beneficial owner would be allowed as a refund or a credit against
the beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
PS-22
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee
benefit plan (a "plan") subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), should consider the fiduciary standards of
ERISA in the context of the plan's particular circumstances before authorizing
an investment in the Notes. Accordingly, among other factors, the fiduciary
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the
documents and instruments governing the plan, and whether the investment would
involve a prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code.
Section 406 of ERISA and Section 4975 of the Code prohibit plans, as
well as individual retirement accounts and Keogh plans subject to Section 4975
of the Code (also "plans") from engaging in certain transactions involving
"plan assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("parties in interest") with respect to
the plan or account. A violation of these prohibited transaction rules may
result in civil penalties or other liabilities under ERISA and/or an excise
tax under Section 4975 of the Code for those persons, unless exemptive relief
is available under an applicable statutory, regulatory or administrative
exemption. Certain employee benefit plans and arrangements including those
that are governmental plans (as defined in Section 3(32) of ERISA), certain
church plans (as defined in Section 3(33) of ERISA) and foreign plans (as
described in Section 4(b)(4) of ERISA) ("non-ERISA arrangements") are not
subject to the requirements of ERISA or Section 4975 of the Code but may be
subject to similar provisions under applicable federal, state, local, foreign
or other regulations, rules or laws ("similar laws").
The acquisition of the Notes by a plan with respect to which we,
MLPF&S or certain of our affiliates is or becomes a party in interest may
constitute or result in a prohibited transaction under ERISA or Section 4975
of the Code, unless those Notes are acquired pursuant to and in accordance
with an applicable exemption. The U.S. Department of Labor has issued five
prohibited transaction class exemptions, or "PTCEs", that may provide
exemptive relief if required for direct or indirect prohibited transactions
that may arise from the purchase or holding of the Notes. These exemptions
are:
(1) PTCE 84-14, an exemption for certain transactions determined or
effected by independent qualified professional asset managers;
(2) PTCE 90-1, an exemption for certain transactions involving
insurance company pooled separate accounts;
(3) PTCE 91-38, an exemption for certain transactions involving
bank collective investment funds;
(4) PTCE 95-60, an exemption for transactions involving certain
insurance company general accounts; and
(5) PTCE 96-23, an exemption for plan asset transactions managed by
in-house asset managers.
The Notes may not be purchased or held by (1) any plan, (2) any
entity whose underlying assets include "plan assets" by reason of any plan's
investment in the entity (a "plan asset entity") or (3) any person investing
"plan assets" of any plan, unless in each case the purchaser or holder is
eligible for the exemptive relief available under one or more of the PTCEs
listed above or another applicable similar exemption. Any purchaser or holder
of the Notes or any interest in the Notes will be deemed to have represented
by its purchase and holding of the Notes that it either (1) is not a plan or a
plan asset entity and is not purchasing those Notes on behalf of or with "plan
assets" of any plan or plan asset entity or (2) with respect to the purchase
or holding, is eligible for the exemptive relief available under any of the
PTCEs listed above or another applicable exemption. In addition, any purchaser
or holder of the Notes or any interest in the Notes which is a non-ERISA
arrangement will be deemed to have represented by its purchase and holding of
the Notes that its purchase and holding will not violate the provisions of any
similar law.
Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is
important that fiduciaries or other persons considering purchasing the Notes
on behalf of or with "plan assets" of any plan, plan asset entity or non-ERISA
arrangement consult with their counsel
PS-23
regarding the availability of exemptive relief under any of the PTCEs listed
above or any other applicable exemption, or the potential consequences of any
purchase or holding under similar laws, as applicable.
USE OF PROCEEDS AND HEDGING
The net proceeds from the sale of the Notes will be used as
described under "Use of Proceeds" in the accompanying prospectus and to hedge
market risks of ML&Co. associated with its obligation to pay the Redemption
Amount.
SUPPLEMENTAL PLAN OF DISTRIBUTION
MLPF&S has advised ML&Co. that it proposes initially to offer all or
part of the Notes directly to the public on a fixed price basis at the
offering prices set forth on the cover of this pricing supplement. After the
initial public offering, the public offering prices may be changed. The
obligations of MLPF&S are subject to certain conditions and it is committed to
take and pay for all of the Notes if any are taken.
EXPERTS
The consolidated financial statements, the related financial
statement schedule, and management's report on the effectiveness of internal
control over financial reporting incorporated in this pricing supplement by
reference from Merrill Lynch & Co., Inc.'s Annual Report on Form 10-K for the
year ended December 30, 2005 have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
PS-24
INDEX OF CERTAIN DEFINED TERMS
Business Day.............................................................PS-15
Calculation Agent.........................................................PS-6
Calculation Day..........................................................PS-12
Calculation Period.......................................................PS-12
Capped Value..............................................................PS-4
Ending Value..............................................................PS-4
Index.....................................................................PS-3
Index Business Day.......................................................PS-12
Market Disruption Event..................................................PS-14
Notes.....................................................................PS-1
Pricing Date..............................................................PS-4
Redemption Amount.........................................................PS-4
Starting Value............................................................PS-4
successor index..........................................................PS-15
PS-25
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[LOGO OMITTED]
6,851,510 Units
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series C
Accelerated Return Notes(R)
Linked to the Dow Jones EURO STOXX 50 Index
due May 8, 2007
$10 original public offering price per unit
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PRICING SUPPLEMENT
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Merrill Lynch & Co.
March 1, 2006
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